2019 (10) TMI 1263 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - It is noted that the reply of the Corporate Debtor that it is a going concern with over 100 employees an asset value of more than 39 crore and an inventory of finished and unfinished stock of more than 80 crore. However under the IBC architecture the shift is from inability to pay to existence of default. Hon ble Supreme Court in Swiss Ribbons Pvt Ltd another v Union of India others 2019 (1) TMI 1508 - SUPREME COURT . Therefore the present petition cannot be decided on the basis of existence of employees or asset value of the Corporate Debtor or the inventory of stock available. It will have to be decided on the basis of existence of default. The Corporate Debtor has admitted the liability by the letter dated 05.02.2019 at pp.122-123 of the Petition. The Corporate Debtor had sought time till 25.03.2019 to repay all the outstanding dues. However until the hearing of the petition on 06.09.2019 the Corporate Debtor has not settled the outstanding dues. It clearly shows that the Corporate Debtor is in default of a debt due and payable and the default is in excess of the minimum amount of one lakh rupees stipulated under section 4(1) of the IBC - the default stands established and there is no reason to deny the admission of the Petition. The application made by the Financial Creditor is complete in all respects as required by law - this Tribunal admits this Petition and orders initiation of CIRP against the Corporate Debtor. Petition admitted - moratorium declared.

Summary

Issues:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under section 7 of the Insolvency & Bankruptcy Code, 2016.
2. Jurisdiction of the National Company Law Tribunal, Mumbai.
3. Default in payment by the Corporate Debtor.
4. Validity of the petition filed by the Financial Creditor.
5. Admission of liability by the Corporate Debtor.
6. Appointment of Interim Resolution Professional (IRP) and management during the CIRP.

Analysis:
1. The matter involved a Company Petition filed under section 7 of the Insolvency & Bankruptcy Code, 2016 by a Financial Creditor seeking to initiate Corporate Insolvency Resolution Process (CIRP) against a Corporate Debtor for non-payment of a significant sum.
2. The Corporate Debtor contested the petition, claiming financial soundness and commercial solvency, but the Tribunal emphasized that the shift under the IBC is from "inability to pay" to "existence of default," as established by the Supreme Court.
3. The Tribunal noted that the Corporate Debtor admitted the liability in writing but failed to settle the outstanding dues, leading to a clear default exceeding the minimum amount stipulated under the IBC.
4. The Corporate Debtor's argument that action can only be initiated after a decision by the Majority Debenture Holders was dismissed, as it would be against the provisions of the IBC, and the Financial Creditor was within their rights to file the petition.
5. Based on the evidence and arguments presented, the Tribunal admitted the petition, ordered the initiation of CIRP against the Corporate Debtor, and appointed an Interim Resolution Professional (IRP) to manage the affairs during the CIRP period.
6. The Tribunal also imposed a moratorium on various actions against the Corporate Debtor, directed the Financial Creditor to deposit a sum for expenses, and instructed the Corporate Debtor to cooperate with the IRP in providing necessary information.

This comprehensive analysis covers the legal judgment in detail, addressing each issue involved in the case before the National Company Law Tribunal, Mumbai.